W.C. No. 4-261-540 4-312-835Industrial Claim Appeals Office.
December 9, 2003
FINAL ORDER
In these workers’ compensation cases, which were consolidated for hearing, respondents U.S. Home Corporation (USH) and its insurer, Old Republic Insurance Company (collectively the USH respondents) seek review of an order of Administrative Law Judge Felter (ALJ Felter) which held them liable for benefits as the claimant’s statutory employer. The USH respondents also seek review of an order of ALJ Mattoon which requires them to pay medical benefits. We affirm both orders.
We first consider the USH respondents’ appeal from ALJ Felter’s order. As the parties recognize, these cases have a long and complex procedural history. Suffice it to say that W.C. No. 4-261-540 concerns the claim that either Integrity Business Service (IBS), or Red Oak Carpet Center (Red Oak), and its insurer Allied Mutual Insurance Company (Allied) are responsible for injuries which the claimant sustained on March 22, 1995. It was ultimately determined that IBS is liable as an uninsured employer and Red Oak is not liable as the claimant’s putative statutory employer. These determinations were affirmed by the Court of Appeals in Wright v. Integrity Business Services, Inc., (Colo.App. No. 97CA1976, November 13, 1998) (not selected for publication). The court’s decision contains a summary of the history of W.C. No. 4-261-540, and that summary is incorporated herein.
W.C. No. 4-312-835 concerns the claimant’s contention that USH is liable for his injuries as a statutory employer. ALJ Felter’s order dated September 11, 2002, contains an outline of the procedural history of this claim, and that outline is incorporated herein.
In the order of September 11, 2002, ALJ Felter found that at the time the claimant was injured on March 22, 1995, the claimant was a “formal employee” of IBS under an employee “leaseback” contract between IBS and Red Oak. Further, ALJ Felter found that at the time of the claimant’s injuries Red Oak was principally engaged in the business of selling carpet, not laying carpet. (Finding of Fact 3). Moreover, the ALJ found that there was no persuasive proof that Red Oak was insured for carpet laying activities on the date of the injury. In contrast, the ALJ found that laying carpet was a routine, regular and important part of USH’s business of constructing and selling family homes. Consequently, ALJ Felter concluded that USH is liable for the claimant’s injuries as a statutory employer, and USH is not immune from on the theory that Red Oak was an insured subcontractor. Because ALJ Felter determined that Red Oak was not the claimant’s statutory employer, he also denied the claimant’s petition to reopen W.C. No. 4-261-540 based on an alleged mistake of fact.
I.
On review, the USH respondents first dispute the sufficiency of the evidence with respect to numerous findings of fact. Essentially, the USH respondents argue the record lacks substantial evidence to support ALJ Felter’s findings that Red Oak was not in the business of laying carpet on the date of the claimant’s injuries, that Allied did not insure Red Oak for carpet laying, and that the regular business of USH involved the laying of carpet. Thus, the effect of the USH respondents’ arguments is to dispute ALJ Felter’s determination that USH is liable as a statutory employer because Red Oak was not an insured subcontractor. We disagree with the USH respondents’ contentions.
Section 8-41-401(1)(a), C.R.S. 2003, renders a general contractor liable for injuries to employees of a subcontractor if the general contractor contracted out part of its regular business operation to the subcontractor. Section 8-41-401(2), C.R.S. 2003, prevents an injured employee from reaching “upstream” to impose liability on the general contractor if the subcontractor has procured insurance which covers the injury. This statutory scheme is designed to prevent employers, such a general contractors, from avoiding liability for workers’ compensation injuries associated with their projects by contracting out the work to uninsured subcontractors. Finlay v. Storage Technology Corp., 764 P.2d 62
(Colo. 1988).
The question of whether a contractor has contracted out any part or all of its work requires the ALJ to consider the employer’s “total business operation” with respect to the “routineness, regularity, and the importance of the service to the regular business of the employer.” The “importance” of a service may be evaluated by considering whether, if the services were not contracted for, the employer would be required to provide them by hiring its own employees. Importance may also be evaluated by considering the degree of control retained by the party which contracts out for a service. Id. at 67.
Ultimately, resolution of the question is one of fact for determination by the ALJ. M M Management Co. v. Industrial Claim Appeals Office, 979 P.2d 574 (Colo.App. 1998). Consequently, we must uphold the ALJ’s determination if supported by substantial evidence in the record. Section 8-43-301(8), C.R.S. 2003. This standard of review requires us to view the evidence in a light most favorable to the prevailing party, and defer to the ALJ’s resolution of conflicts in the evidence, credibility determinations, and plausible inferences drawn from the record. Metro Moving Storage Co. v. Gussert, 914 P.2d 411 (Colo.App. 1995). Further, it is immaterial whether some evidence, if credited, would support a contrary result. Wilson v. Industrial Claim Appeals Office,
___ P.3d ___ (Colo.App. No. 02CA2140, August 14, 2003). Evidence not mentioned in the ALJ’s order is considered to have been rejected Magnetic Engineering, Inc. v. Industrial Claim Appeals Office, 5 P.3d 385
(Colo.App. 2000).
Essentially, the USH respondents contend the ALJ’s finding that Red Oak had withdrawn from the carpet laying business by the time of the claimant’s injury is “irrelevant” because Red Oak leased back employees to satisfy its contractual agreement to provide carpet laying services on USH’s job sites. The USH respondents also cite evidence from Red Oak’s counsel and the testimony of O’Neil that laying carpet was part of Red Oak’s business.
However, the respondents’ arguments merely represent one interpretation of the evidence which was not adopted by ALJ Felter. The testimony of O’Neil, although somewhat inconsistent, indicates that, at the time of the claimant’s injury, he was a supervisor for IBS and directing the claimant’s activities on behalf of IBS. Thus, Red Oak retained little if any control over the activities of O’Neil or the claimant by March 1995. This evidence supports the ALJ’s determination that Red Oak was not in the carpet laying business, and the day to day management of this activity was not important to its general business operation of selling carpet to USH.
It is true that Red Oak had a contractual obligation to install carpet for USH, which was entered into before the leaseback contract was entered into with IBS. However, the ALJ apparently viewed the leaseback arrangement as a method of insuring that Red Oak’s preexisting contractual obligation to USH was fulfilled while permitting Red Oak to cease performing the carpet laying aspect of its operation. In this sense, the ALJ viewed Red Oak as engaged in the business of procuring carpet layers for fulfillment of the contract without being engaged in carpet laying itself. Indeed, the ALJ found the leaseback arrangement was entered into for legitimate business reasons, which O’Neil testified involved Red Oak’s desire to avoid costs associated with potential employee lawsuits. (O’Neil Depo. Pp. 10, 46). Put another way, the ALJ determined that Red Oak had withdrawn from the carpet laying business because it determined this aspect of its former business was not sufficiently profitable in light of its total business operation. Rather, as the ALJ found, by March 1995 Red Oak determined that carpet sales, not carpet installation would be its regular business and had acted accordingly.
The fact that O’Neill and Red Oak’s corporate counsel opined that carpet laying was part of Red Oak’s regular business operation was not binding on the ALJ. Indeed, the record suggests potential bias on the part of these witnesses because a determination that Red Oak was not an insured statutory employer of the claimant subjected Red Oak to potential liability to USH.
We also reject the USH respondents’ argument that ALJ Felter erred in determining that carpet installation was part of USH’s regular business operation. As the ALJ found, the parties stipulated that none of the homes sold by USH in 1995 was sold without floor coverings. Moreover, USH maintained a home decoration center where home buyers could select carpet and other items to be installed in new homes. Based on this stipulation the ALJ logically inferred that installation of carpet and other floor coverings was an essential element of USH’s regular business of selling new homes. In light of the stipulation the ALJ was not compelled to credit the affidavit of USH’s vice president and controller that, although USH is in the business of constructing residential homes, that business does not include the installation of floor coverings.
We perceive no error in ALJ Felter’s finding that the claimant was “formally” employed by IBS. An ALJ is not held to a crystalline standard in expressing findings of fact and conclusions of law. Magnetic Engineering, Inc. v. Industrial Claim Appeals Office, supra. As we understand the finding, the ALJ determined that the actual contract of employment was between the claimant and IBS. This finding is supported by substantial evidence, including O’Neill’s testimony.
However, even if Red Oak was the claimant’s statutory employer because carpet laying was part of Red Oak’s regular business operation, USH is not immune unless, pursuant to § 8-41-401(2), Red Oak kept its workers’ compensation liability insured at the time of the claimant’s accident. However, ALJ Felter found there was “no persuasive evidence” that USH kept its liability insured “for the activity of laying carpet.” (Findings of Fact 3, 7). In support of this determination, the ALJ specifically cited a “Disclosure Statement” which Red Oak submitted to USH, dated September 27, 1994, which the ALJ construed as stating that Red Oak had no “contract laborers” and insured only corporate officers. The USH respondents challenge the sufficiency of the evidence to support these findings. Again, we find no error.
The following language from our Order of Remand dated June 28, 2000, is pertinent.
However, it is not the policy of workers’ compensation which measures the liability of the insured. Rather, insurance coverage is “coextensive only with the employer’s liability in the operations covered by the policy or some naturally connected business.” Grand Mesa Trucking, Inc. v. Industrial Commission, 705 P.2d 1038 (Colo.App. 1985); State Compensation Insurance Fund v. Dean, 689 P.2d 1146 (Colo.App. 1984). Consequently, in order to obtain the immunity conferred by § 8-41-401(2), the Old Republic respondents [USH respondents herein] were obligated to establish not only that Red Oak purchased a policy of workers’ compensation insurance, but that the policy covered the claimant’s activities at the time of the injury. Otherwise, Red Oak would not have insured its “liability for compensation” within the meaning of the statute.
Here, there is ample evidence that the policy purchased by Red Oak did not cover carpet installation. Red Oak’s application for workers’ compensation insurance, apparently submitted to Allied in August 1994, described Red Oak’s business as “carpet-floor coverings-sales” and listed covered duties as clerical, outside sales, and house furnishings. When forwarding the application the insurance agent submitted a note to Allied saying that Red Oak was engaged in the sale and delivery of carpet and “does not hire subs — they are hired and paid by the end user.” The declarations page of the insurance policy listed “classification of operations as clerical office employees NOC, salespersons-outside, and store: furniture and drivers. ALJ Felter plausibly concluded that carpet laying was not an activity covered by the policy, nor was it “naturally connected” to any of the covered activities. (See Documents attached to Claimant’s Position Statement dated July 22, 2002).
It is true, as the USH respondents argue, that a claims superintendent for Allied testified that if the liability decision in favor of Allied were reversed (rendering Red Oak liable as a statutory employer) he had “no reason to believe” that Allied would deny coverage. (Lenyo Depo. P. 26). However, the same witness also testified that he understood that Red Oak’s business was carpet sales, not installation, and that was the basis of Allied’s position that it is not liable to the claimant. (Lenyo Depo. Pp. 8-9). Therefore, this testimony is internally inconsistent and did not compel ALJ Felter to conclude that Red Oak was insured for the activity of carpet installation. Moreover, the ALJ was not compelled to credit the testimony of this witness, and he did not do so.
In concluding that there was not persuasive evidence of insurance, ALJ Felter noted that Red Oak submitted a “Disclosure Statement” to USH regarding “company structure” and workers’ compensation coverage. ALJ Felter found that Red Oak circled the word “yes” next to the question of whether it had “contract laborers.” However, ALJ Felter determined that Red Oak placed an “x” over the “yes,” and that the document in its entirety should be construed to mean that Red Oak was disclosing coverage for corporate officers, not contract laborers. The USH respondents argue that it can’t be determined when the “x” was placed on the document, and there is no evidence concerning that issue. However, the document is dated September 27, 1994, and was presumably submitted by Red Oak to USH. Thus, the ALJ logically inferred that the change to the document occurred on or before submission of the document by Red Oak because USH produced no evidence that the document was altered while it was in the custody of USH.
We have considered the remaining arguments regarding the sufficiency of the evidence to support ALJ Felter’s conclusion that USH was the claimant’s statutory employer on the date of the injury. The other disputed findings are either supported by substantial evidence and/or immaterial to legally dispositive issues. In particular, we need not consider whether the ALJ correctly determined that the claimant was assigned by IBS to USH and that there was an “implied contract of hire” between the claimant and USH. Further, since the evidence supports the finding that Red Oak was not an insured statutory employer, the ALJ correctly denied the petition to reopen W.C. No. 4-261-540. We need not reach the question of whether the USH respondents have standing to contest this issue. We assume, arguendo, that the issue was timely raised.
II.
The USH respondents raise several other contentions concerning the propriety of ALJ Felter’s order. These include the argument that the claim was properly dismissed by ALJ Wheelock based on an untimely response to a motion to dismiss. The USH respondents further contend ALJ Felter improperly “skipped a rung” on the ladder of statutory employment, that the claim is barred by the doctrine of collateral estoppel, and that the order authorizes an impermissible “double recovery.” These arguments were fully discussed and rejected in our Order of Remand dated September 14, 1998. The USH respondents’ current arguments do not persuade us to depart from our prior holdings, and they are incorporated herein as if fully set forth.
III.
The USH respondents next contend the ALJ Mattoon erred in ordering them to pay for Dr. Polanco’s treatment commencing in April 1995, and for treatments rendered by providers to whom Dr. Polanco referred the claimant. In this regard, ALJ Mattoon found the claimant initially treated with his personal physician, but on April 26, 1995, commenced treatment with Dr. Polanco, “the designated provider for Respondent/Employer.”
The USH respondents contend there is no evidence that USH or Allied ever designated Dr. Polanco as the claimant’s treating physician. Therefore, they reason the treatment is unauthorized and they are not required to pay for it. They further assert that if the claimant came to be treated by Dr. Polanco on referral of his personal physician, the treatment is not authorized. Under the facts of this case, we perceive no error.
Section 8-43-404(5)(a), C.R.S. 2003, provides that in “all cases of injury the employer or insurer has the right in the first instance to select the physician who attends said injured employee.” If the right of first selection is exercised by the employer, the claimant may not change physicians or retain additional physicians without obtaining permission from the insurer or an ALJ. If the claimant obtains treatment without obtaining permission the treatment is considered “unauthorized,” and the employer or insurer is not liable to pay for it. See Yeck v. Industrial Claim Appeals Office, 996 P.2d 228 (Colo.App. 1999); Pickett v. Colorado State Hospital, 32 Colo. App. 282, 513 P.2d 228 (1973).
Here, it is true that USH and its insurer did not authorize treatment by Dr. Polanco. In fact, it appears that IBS, the claimant’s actual employer, selected Dr. Polanco as the authorized treating physician for the case. (See Claimant’s Exhibit 2, submitted June 25, 2002, note from Dr. Hamstra’s office dated April 20, 1995, stating “Amy” from IBS said the claimant was to be seen by Dr. Polanco for follow-up; Tr. December 16, 2002, P. 21, claimant testifies that his care was transferred to Dr. Polanco; Tr. November 6, 1995, claimant testifies that Amy of IBS wanted him to obtain care from Dr. Polanco at Health Quest Medical Center).
Under these circumstances, the record supports ALJ Mattoon’s conclusion that the treatment by Dr. Polanco was authorized. When IBS designated Dr. Polanco as the authorized treating physician in April 1995, the claimant was required to accept the designation and obtain treatment from Dr. Polanco or face the risk that alternative treatment would be considered unauthorized. Further, there is no suggestion that the claimant knew, at the time of designation, that a controversy would arise over the existence of insurance, the identity of his actual and statutory employers, and ultimately which of several employers and insurers would be liable for his treatment. Instead, the claimant complied with the mandate of the statute and accepted treatment from a provider selected by his employer.
In our opinion, the fact that a controversy subsequently arose concerning the identity of the liable employer and insurer did not change the fact that, in the “first instance,” the claimant’s actual employer (IBS) selected an authorized physician. Moreover, USH was aware of a potential claim against it no later than January 1996 when the claimant filed a motion to join USH as a party in W.C. No. 4-261-540. There is no evidence that USH objected to the continuation of treatment with Dr. Polanco, or that it attempted to appoint a new treating physician. Under these circumstances, USH acquiesced in the selection of Dr. Polanco by failing to raise any objection to his continuation as the authorized treating physician. See Greager v. Industrial Commission, 701 P.2d 168
(Colo.App. 1985) (claimant may engage otherwise unauthorized treatment if, with full knowledge over a sustained period of time, the employer or insurer fails to object).
IT IS THEREFORE ORDERED that ALJ Felter’s order dated September 11, 2002, is affirmed.
IT IS FURTHER ORDERED that ALJ Mattoon’s order dated January 13, 2003, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ David Cain
______________________________ Kathy E. Dean
NOTICE
This Order is final unless an action to modify or vacate this Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, Colorado 80203, by filing a Petition to Review with the Court, within twenty (20) days after the date this Order was mailed, pursuant to §8-43-301(10) and § 8-43-307, C.R.S. 2003. The appealing party must serve a copy of the Petition upon all other parties, including the Industrial Claim Appeals Office, which may be served by mail at 1515 Arapahoe, Tower 3, Suite 350, Denver, CO 80202.
Copies of this order were mailed to the parties at the addresses shown below on December 9, 2003 by A. Hurtado.
William Wright, 4440 Cobbleskill Dr., Colorado Springs, CO 80920
U.S. Home Corporation, 9990 Park Meadow Dr., Lone Tree, CO 80124
Mike Fallowfield, U.S. Home Corporation, P. O. Box 2863, Houston, TX 77252-2863
Kevin O’Neil, Red Oak Carpet Center, 3809 E. Cresta Loma Pl., Colorado Springs, CO 80911
Integrity Business Services, Woodmen Corporate Center, 7150 Campus Dr., #325, Colorado Springs, CO 80920
Old Republic Insurance Company, c/o Gallagher Bassett Services, Inc., 7935 E. Prentice Ave., #305, Englewood, CO 80111
Suzanne Polyakovics, Allied Mutual Insurance Company, P. O. Box 5190, Denver, CO 80217
W. Thomas Beltz, Esq. and Daniel A. West, Esq., 729 S. Cascade Ave., Colorado Springs, CO 80903 (For Claimant)
James R. Clifton, Esq. and Harvey D. Flewelling, Esq., 5353 W. Dartmouth Ave., #400, Denver, CO 80227 (For Respondents U.S. Home Corporation and Old Republic Insurance Company)
Douglas A. Thomas, Esq., 5600 S. Quebec St., #130-D, Greenwood Village, CO 80111 (For Allied Mutual Insurance Company)
Brian D. Milligan, Esq. and Richard J. Lesch, Esq., 1515 Arapahoe St., Tower 1, #530, Denver, CO 80202 (For Red Oak Carpet Center)